MAASAI MARA UNIVERSITY
REGULAR UNIVERSITY EXAMINATIONS
2015/2016 ACADEMIC YEAR
FIRST YEAR SECOND SEMESTER
SCHOOL OF BUSINESS AND ECONOMICS
BACHELOR OF ARTS ECONOMICS
COURSE CODE: ECO 110
COURSE TITLE: INTRODUCTION TO
MICROECONOMICS
DATE: 11TH MAY 2016 TIME: 11.00-13.00
INSTRUCTIONS TO CANDIDATES
1. Answer Question ONE and any other THREE questions
This paper consists of TWO printed pages. Please turn over.
QUESTION ONE
(a) State the law of demand. (2mks)
(b) Explain the applications of the concept of elasticity. (6mks)
(c) Highlight the characteristics of a free market system. (5mks)
(d) Distinguish between ordinal and cardinal utility theories. (4mks)
(e) The demand and supply curves of commodity W in the market are defined by the following functions
P=100-2Qd
P=4Qs
Where Qd is the quantity demand. Qs is the quantity supplied and P is the price.
Determine the equilibrium price and quantity of W in the market. (4mks)
(f) Following the price decrease of eggs from ksh 5 to ksh 3 per egg, the quantity demanded for eggs per day increased from 45 to 60. Calculate the price elasticity of demand. (4mks)
QUESTION TWO
(a) Explain any three sources of monopoly power. (6mks)
(b) Explain the exceptions of the law of demand. (6mks)
(c) Distinguish between a normal and an inferior good. (3mks)
QUESTION THREE
(a) Explain the properties of an indifference curve. (5mks)
(b) With the aid of a diagram explain the stages of production. (10mks)
QUESTION FOUR
(a) Explain the factors of internal economies of scale. (8mks)
(b) Explain the concept of a kinked demand curve. (4mks)
(c) Explain the concept of a shift and movement in the supply curve. (3mks)
QUESTION FIVE
(a) Highlight the conditions necessary for profit maximization. (2mks)
(b) Distinguish between monopoly and monopolistic competition. (6mks)
(c) Illustrate the determination of normal and abnormal profits in a perfectly competitive market. (7mks)
